It is early , when so many over-inflated business plans finally popped, the dot.com Emperors were revealed in their nakedness and the industry woke from its mass hallucination of indefinite boom. It is the time for cashing in share options, strapping on parachutes and leaping to safety, not taking off on a wing and a prayer with a new venture. But exceptions not only prove rules, but make life interesting - who dares can win...if they have done their homework.
Tradingcom Europe began life in late , cofounded by chairman and CEO Arnaud Beauregard, formerly boss of AXS Telecom, which resold phone services to corporates and consumers in France, Spain and the UK, before being acquired eventually by Tiscali. Alongside co-founder and chief operating officer Richard Maindron, Beauregard realised just how difficult it was to purchase voice minutes in the French market - consistent price and quality were non-existent. They saw a niche for a third-party company to enable resellers such as AXS to buy telephone traffic termination far more efficiently and reliably than before.
BUCKING THE TREND
Liberalisation of the French telecommunications market in early was the specific catalyst needed to develop the business model sufficiently before the travails of the industry began. As in everything from cricket to conducting, timing is integral to success - Tradingcom's commercial launch year of was no accident: earlier would not have sustained the necessary level of competition; much later would have coincided with the downturn and the opportunity would have evaporated.
The company's UK managing director Bertrand Rame points out the problems: "The market has been plagued by inefficiency. Over-capacity in pipes with their fixed costs led to too many carriers trying to buy and sell from one another." It was a whirlwind reaped on predictions and assessments made perhaps a decade ago of how much the Internet would grow to fuel demand for bandwidth; it did not.
Voice traffic, however, remained stable and even increased slowly but steadily, with international voice volumes rising at around 5 per cent per annum, although the revenue per minute has dipped. The trend continues upwards - notably with the number of calls terminated on mobiles in recent times. But, he adds: "Commodity-priced voice has not happened to the extent that was forecast."
In parts of Eastern Europe, for example, mobile is the preferred or only communications option due to poor or non-existent - fixed line facilities. Thanks to this kind of influence, mobile (voice's "silver lining" says Rame) is ensuring the average revenue per minute remains stable or rising slightly.
ONE-TO-ONE-DEALING
So Tradingcom became the first European" trader" of telecommunications capacities, enabling both clients and suppliers - international telecommunications and Internet players - to buy and sell their telecommunications capacities dynamically. It acts as a trader for carriers' switched minutes (about 90 per cent of its business) and as a broker for their pure bandwidth capacity and IP transit. For switched minutes, carriers buy and sell from Tradingcom; for the other services, it acts like an agent, bringing the relevant parties together: "We own no network, we just know lots of people," Rame explains.
The traditional model (Figure 1) for dealings between carriers is a complex matrix; in contrast, Tradingcom creates a one-to-one relationship through a single interconnection, enabling the service provider customer to buy and sell their voice traffic through that one conduit. "We create simplified relations between buyers and suppliers Point of access, contract, invoice, commercial contact and technical support are all in one place, reducing the complexity and the number of negotiations which are usually required in the switched minutes market"
Customers and suppliers reach a market representing several hundred buyers and sellers immediately and via this single connection. Deals are made through Tradingcom's Ericsson AXE public switch, installed at Telehouse in London's Docklands,
CLEAR GOALS, NO DEBTS
So how has Tradingcom managed to buck the trend and thrive in an adverse economic climate? A significant cause in the recent and continuing decline of many companies in the telecommunications sector is their inability, historically, to get the basic elements of sound economics correct Many simply fly in the face of financial commentators and, eventually, disgruntled investors: "We are at the heart of a difficult economic cycle. It is often companies like this which are the first to suffer financial attacks - and so it has proved."
Although Tradingcom believes in a risk-taking, entrepreneurial approach, it was well aware of the potential pitfalls this strategy can often bring. It therefore took great care to plan its targets as well as in the way it handled the crucial start-up phase. It stuck to basic rules of forward planning, financial prudence and good management the resulting growth is proof this approach works: "We believe it is one of the surest ways to succeed in economically difficult times. For companies in competitive or sensitive markets, it offers far greater chance of weathering future economic storms," says Rame.
In an industry best by credit control and payment problems, Tradingcom recognised the need to have credit control and bad debt precautions firmly in place: We could be 100 times larger, but we prefer tight credit management," says Rame, "It was our number one priority from the start." Bad debt in a business where margins are low can make or break an enterprise. A company can be sound one minute, then lose a payment, lose the margin and be teetering itself the next.
From the beginning, Tradingcom chose to outsource to an external credit insurer - a bold move now seen as integral to the company's success - turnover in was estimated at E29 million with almost 100 operators connected. "It has proved a distinct advantage is to be linked to one of Europe's foremost credit control and credit checking companies. We have no significant bad debts to date and will turn away clients in circumstance where any risk of future payment problems."
Tradingcom Europe - the new deal
Operators have the opportunity to:
* Have real-time access to an original and low-cost sales channel that connects them - almost instantaneously with hundreds of potential clients via an extranet.
* Buy minutes at spot market prices with defined levels of quality.
* Sell minutes at competitive prices.
* Buy bandwidth with clearly identified quality parameters, quickly and at the lowest rates.
* Sell unused capacity, which would otherwise stay idle.
* Reduce costs and delays related to interconnections.
* Exploit dormant links and optimise Least Cost Routing management
Tradingcom, trading telecoms capacities across three platforms in London, Frankfurt and Paris, keeps a close watch on the quality, price and capacities available.
Quality: Tradingcom constantly measures quality using as indicators Answer Seizure Ratio, Network Effectiveness Ratio and Post Dial Delay, communicating the results to its members.
Price: Tradingcom's spot price list comprises more than 500 destinations. Updated in real time, it is available on the extranet for the customers and the suppliers. The idea is to keep customer costs to a minimum by having Tradingcom traders regularly negotiate market prices while maintaining a high quality level.
Capacity: In addition to the infrastructure based on an Ericsson AXE public switch, Tradingcom has created a new software tool for routing analysis and management, known as Best Value Routing (BVR (r)). BVR routes calls in real-time according to quality, price and available capacity for every destination.
Anonymity & neutrality: Tradingcom guarantees the anonymity of transactions to all members and operate from a neutral to ensure the best deals for all parties.
THE "P" WORD
At the same time, Tradingcom has also maintained a focus on its core business: while the rest of the industry was investing millions in IP and data services - with little return to date -Tradingcom has kept its attention on minutes: "It is vital we've seen too many companies diversifying too much. We chose our service and stick to. that good old business called voice. Whether there is a boom taking place or not is largely irrelevant if you've that focus."
A recent and logical business development is acting as broker for trading telecommunications equipment. Tradingcom never buys the stock, except as part of a done deal, but brings seller and purchaser together. Much of the kit is still in its boxes and there are bargains aplenty for however long the opportunity lasts.
